Shawn Teo

22 Aug 2020

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General Investing

Free cash flow to equity calculation (FCFE)?

Saw in a Youtube video done by the channel Learn to Invest where they cover FCFE. The method taught was FCFE= Cash flow from operations- Capex+ Net Borrowings(NB). Is this method used commonly or is NB usually left out? I cant seem to find NB on Yahoo Finance and is it the same as Net Debt? Really confused about this and can someone with more DCF knowledge shed some light?

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Yang Teng

22 Aug 2020

Usually Free Cash Flow to Firm (FCFF) is used. When doing a DCF, ideally, we want to use unleveraged free cash flow so that the impact of capital structure on a firm’s value can be removed, and to make companies more comparable.

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